City Budgets are Hurting Watch Your Funding October 23, 2018 - - PowerPoint PPT Presentation

City Budgets are Hurting

Watch Your Funding

October 23, 2018

Supporting 1 in in 9 U.S .S. jo jobs and contributing $2.4 .4T to our economy

The travel industry fuels economic growth in the U.S.

$ $ $ $ $ $ $

SOURCE: US Travel

Tra ravel l genera rated $16 164.8 .8 billi illion in in to total ta tax revenue in in 2017. . Wit ithout th this is im impact, each U.S .S. . household would pay $1, 1,300 more re in in ta taxes every ry year. r.

SOURCE: US Travel

The Future is Built with Travel Promotion

SOURCE: US Travel

City Fiscal Conditions

• In 2018, the National League of Cities

conducted a report on city fiscal conditions

• The report looked at fiscal

conditions from across the county based on region and population size.

• Their findings indicated a

deceleration of fiscal growth in cities across the county.

Changes in General Fund Revenue and Expenditure

• Steady decline in

revenue since 2016.

• Expenditures are

expected to continue

• utpacing revenues

in the coming years.

SOURCE: National League of Cities

1 2 3 4 2015 2018 (budgeted)

% Change

Year-to-Year Change in General Fund Revenues and Expenditures

% Change in Constant Dollar Revenue (General Fund) % Change in Constant Dollar Expenditures (General Fund)

Changes in General Tax Receipts

• Major revenue

sources include;

• Property Tax
• Income Tax
• Sales Tax
• These major revenue

sources hit their peak in 2015-2016

• All major tax sources

grew more slowly in FY 2017 than FY 2016.

• This trend is expected

to continue in FY 2018.

SOURCE: National League of Cities

1 2 3 4 5 6 2015 2018 (budgeted)

% Change

Year-to-Year Change in General Tax Receipts (Constant Dollars)

Sales Tax (%) Property Tax (%) Income Tax (%)

Ability to Meet Financial Need

SOURCE: National League of Cities

• The level of optimism of city fiscal

conditions is far below the levels in recent years.

• Tax revenue growth is experiencing a

year-over year slowdown.

• Smaller cities were more likely to

report an inability to meet the financial needs of their cities.

Revenue Factors

• Various factors were found to

influence revenue performance, spending levels and overall fiscal conditions.

• City finance officers reported on

which expenditures experienced the biggest increases from the previous year.

• Like previous years, state and

federal aid have decreased the most over the past year.

SOURCE: National League of Cities

20 40 60 80 100 Federal Mandates State Mandates Public Safety Infrastructure Price/Costs Wages

Reported Increases

Reported Increases 10 20 30 State Aid Federal Aid

Reported Decreases

Reported Decreases

City Budgets are Tightening

• A significant contributor to city

budgets tightening is the looming pension crisis.

• Pew Charitable Trust conducted a

study on the pension crisis and discovered alarming statistics nationwide.

• Case studies from California, Illinois,

Minnesota, Massachusetts and Colorado provide insight on the current state of pension.

Pension Crisis Across the USA

SOURCE: Pew Charitable Trust

Pension Crisis in California

• CalPERS calculates being

funding at 68% in 2018

• $168 billion in unfunded liability
• State and local governments

forecasted to make tax increases and budget cuts in

• rder to rescue pension crisis

SOURCE: California League of Cities

0% 20% 40% 60% 80% 100%

Liability Funding Ratio in 2018

Pension Crisis in Illinois

• $130 billion in unfunded

pension liability

• Pension-related

payments currently account for over 25% of state’s expenditures

• The share of the budget

consumed by pension will grow and threaten to take funding from other core services.

SOURCE: Illinoispolicy.org

Pension Crisis in Illinois

• Illinois may allow pension

spending to crowd out government services.

• In Harvey, Illinois pension
• bligations caused mass

layoffs in police and fire departments.

• Due to dramatic increase in

pension expenditure, Illinois state and local government employment has been decreasing

SOURCE: Illinoispolicy.org

Pension Crisis in Minnesota

• Minnesota dropped

26.6 percentage points in their funding ratio in one year

• In 2016, funded at

53.2 .2%, , the 7th worst in the nation

• $50 billion in

unfunded liability

Pension Crisis in Massachusetts

• $86.9 billion in unfunded

liability

• Funded at 57.5%
• State funding for pension

expected to increase from $2.4 billion a year to $11.2 billion by 2036

• Tax dollars anticipated to

be taken from core governmental services

• $20,100
• $23,200
• $24,100
• $25,500
• $28,000
• $27,400
• $30,300
• $32,900
• $33,500

2009 2010 2011 2012 2013 2014 2015 2016 2017

Massachusetts' Taxpayer Burden

SOURCE: Statedatalab.org

Pension Crisis in Colorado

• $32-50 billion in

unfunded liability

• Funded at 61.3%
• ““We are taking money

from new employees and using it to pay off this liability for old employees…some might call that a Ponzi zi scheme”

• Lynn Turner, Public

Employees’ Retirement Association (PERA)

SOURCE: PERA Financial Reports

Yuba-Sutter Tourism Improvement District

Located 45 minutes north east of Sacramento, Yuba and Sutter Counties are home to beautiful landscapes, rich in outdoor activities and natural resources.

• Visit Yuba Sutter was funded

by the City of Yuba City through a multi-year contract.

• On the contract expiration, if

hoteliers were not funding tourism promotion, Yuba City would have to eliminate funding.

• Over seven jurisdictions

participate in the Yuba-Sutter Tourism Improvement District, which generates $250,000 from assessment funding.

State Tourism Marketing Spending

Just a few years ago, the top 50 corporate advertisers spent a staggering $80.6 billion marketing and promoting their brands. By comparison, the 50 state tourism offices spent about 0.5 .5% as much–just $437 million.

SOURCE: US Travel

The Vital Role of Destination Promotion

CHALLENGE SOLUTION: DESTINATION PROMOTION

The primary motivator of a trip is usually the experience

• f

a des- tination, beyond a single business Articulates the brand message that is consistent with consumer motivations Effective marketing requires scale to reach potential visitors Pools sustained resources to provide the economies of scale and marketing infrastructure required to generate impact

2 1

Tourism Funding Stability

Can a vote of the city council or board of commissioners re- direct the funds?

22

Tourism Funding

23

• Membership
• Sponsorships
• Event revenue
• Contract services
• Voluntary district
• Untethered tax allocations
• Tethered tax allocations
• Sales Tax increment financing
• Assessment (TID)

PRIVATE PUBLIC

How Tourism Improvement Districts (TIDs) Work

Tourism businesses pay an assessment… Collected by the local government… And managed by the DMO.

Characteristics

• Level playing field—no free riders
• Transparency
• Reliability
• Pass-through to guests

“I remember when I was governor last time, the tourism industry was always asking me for more money from the state budget…You know I don’t like to spend money very much, so I’m glad you figured out how to to spend your own money. That’s a lot better, because if you had to deal with me, your life would be more difficult.” California Governor Jerry Brown May 3, 2017

National District Statistics

168 TIDS

Most Recent: Squaw Valley, CA (August 2018)

Assessment Structure

14 STATES

AMOUNT RAIS ISED Low $10,000 Median $800,000 High $36,800,000 Total $376,137,806

43%

Fixed $ Amount

57%

Gross Revenue %

Washington Oregon California Montana South Dakota Colorado Kansas Texas Louisiana Tennessee New Jersey Florida Pennsylvania Rhode Island

Active TIDs

NATIONAL TID SURVEY

Tourism Improvement Districts

Survey Says..

On average, destination marketing funding increased 180% after forming a tourism improvement district.

34% of tourism districts increased the rate of assessment from the

• riginal TID amount.

TID Assessment Formula

• Lodging:
• Percentage of sales; or
• Fixed rate per occupied room per night
• Restaurant, Retail, Activities:
• Percentage of sales; or
• Fixed dollar rate that would vary by industry or size
• Usually residential, office, agricultural, and government
• wned parcels would not be subject to the assessment.

• Civitas is the national leader

in BID and TID formation.

• Civitas has completed over

120 BID/TID formation projects throughout the Country.

• Civitas has drafted BID/TID

legislation in 12 states.

• Civitas-created Districts

have raised more than $1.7 billion for tourism promotion DMO’s.

Thank You!

Contact Us

John Lambeth Founder & CEO jlambeth@civitasadvisors.com (800) 999-7781